US Precipitating Protectionist Trade War Between Itself and Other Countries
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In their attempt to stimulate the lagging US economy, the United States government is becoming the catalyst for a protectionist trade war between itself and other countries.
In recent weeks the United States federal reserve has implemented the second round of a plan to purchase 600 billion dollars of US treasury bonds called “quantitative easing”. This is done in order to increase the supply of money when the bank interest rates are at zero.
The purchases, by way of account deposits, gives banks the extra reserves to create new money by way of deposit multiplication from increased lending to businesses and the community, thus stimulating the economy.
But angry political leaders of other countries claim that what the United States actually is doing is devaluing its currency to make its exports more attractive on the international market. It is the same accusation that the US has leveled at China, with whom it is currently in the midst of a bitter feud with. Also these political leaders of other countries claim that the liquidity created by the fed will pour into the stock and commodity markets creating asset bubbles, and the appreciation of currencies causing exports to be more expensive and less attractive on the international market, and reducing competitiveness.
Says Kevin Scott of www.businesswithchina.net “We are already seeing the effects of the United States Federal Reserves plan. South Korea, the Philippines, Thailand have seen their currencies rise as well as have other markets. These countries, and others, will temporarily direct their energies to doing what they can to impose control on the influx of capital, and thus protect their economies. But they will not simply sit back and allow the United States to wreck havoc with their economies. They will individually, or as a group, enter into a protectionist trade war with the US and levy sanctions and quotas at the US until it allows its currency to appreciate and ends its ‘quantitative easing’ immediately”.
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